Barometer indices end on a flat note, unable to maintain early lead

Indian benchmark indices that started the session on firm note failed to maintain their momentum by the end of the session and ended on flat note, as market participants remained wary ahead of US jobs data that could provide some hints about the timing of the Federal Reserve’s likely move on interest rate hike. On the domestic front, sentiments were undermined after the growth of services activity in India softened for the second straight month in May, as new business inflows expanded at the slowest rate since July 2015. However, investors got some comfort with finance minister Arun Jaitley stating that India will attempt to keep the proposed Goods & Services Tax (GST) rate as moderate as possible and the government will push for passage of the bill introducing the levy in the upcoming monsoon session of Parliament. Some support also came with the India Meteorological Department (IMD) stating that the country is all set to receive above-normal monsoon rains this year with a long-period average of 106 per cent. The Met department said that conditions are becoming favourable for the onset of monsoon and it would hit the Indian coast in the next 4-5 days. 

On the global front, Asian market ended the week’s final session on positive note as investors held their positions ahead of US employment data that could add to or detract from the case for a Federal Reserve interest rate hike this month or in July. Sentiments got some support with the repot that Japan's services sector activity expanded in May, rebounding back from a contraction in the previous month because of a modest increase in new orders. Moreover, the services sector in China continued to expand in May, albeit at a slower pace, the latest survey from Caixin revealed on Friday with a services PMI score of 51.2. Besides, stable crude oil prices after the OPEC meet failed to agree on output limits aided the rise in key indices. Meanwhile, European stocks traded marginally in the positive range as the ECB meet on Thursday decided to keep key rates unchanged.

Back home, Indian benchmark indices started the session on firm note as traders and foreign funds built long positions, driven by a series of positive factors such as forecast of a normal to excess rainfall this monsoon, robust GDP numbers and encouraging earnings.  However, the bourses failed to capitalize on the early momentum and slipped to lower levels after growth in India`s services industry slowed sharply in May to a six-month low, due to a deceleration in new orders. The Nikkei/Market Services Purchasing Managers` Index slumped to 51.0 in May from April`s 53.7. The frontline indices kept losing momentum through the session and finally dipped into the negative terrain in the last leg of trade. However, mild short covering in final movement of trade ensured that the key gauges settle in close proximity with previous closing levels. Eventually the NSE’s 50-share broadly followed index Nifty, settled with single digit gains above the crucial 8200 support level, while Bombay Stock Exchange’s Sensitive Index Sensex ended flat closing below the psychological 26,850 mark. On the BSE sectoral space, Consumer Durables and Realty pockets remained among top laggards in the space as they got lacerated by 1.75% and 1.14% respectively. While sectors like Capital Goods, TECK and PSU too got pounded in the session. On the flipside, the rate sensitive like Banking and Auto along with high beta sectors like- Power went home with moderate gains of around half a percent.  The market breadth remained pessimistic as there were 1091 shares on the gaining side against 1532 shares on the losing side, while 177 shares remained unchanged.

Finally, the BSE Sensex ended lower by 0.11 points to 26843.03, while the CNX Nifty gained 1.85 points or 0.02% to 8,220.80. 

The BSE Sensex touched a high and a low 27008.14 and 26792.07, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.11%, while Small cap index declined by 0.42%.

The top gaining sectoral indices on the BSE were Bankex up by 0.82%, Auto up by 0.45%, Power up by 0.44%, Oil & Gas up by 0.22% and IT up by 0.10%, while Consumer Durables down by 1.75%, Realty down by 1.14%, Capital Goods down by 0.90%, TECK down by 0.29% and PSU down by 0.09% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 3.52%, NTPC up by 2.04%, Hindustan Unilever up by 1.86%, Mahindra & Mahindra up by 1.56% and Bajaj Auto up by 1.55%. On the flip side, Bharti Airtel down by 2.12%, SBI down by 2.02%, Lupin down by 1.82%, BHEL down by 1.67% and GAIL India down by 1.46% were the top losers.

Meanwhile, after the weak manufacturing activity, the growth of services activity in India too softened for the second straight month in May, as new business inflows expanded at the slowest rate since July 2015. The seasonally adjusted Nikkei Services Business Activity Index fell to 51.0 in May from 53.7 in April. Although service providers remained optimistic that output will expand in the year ahead, the level of confidence was the lowest recorded since February.

The seasonally adjusted Nikkei India Composite PMI Output Index, which measures both the manufacturing and the services sectors, fell to a six-month low of 50.9 in May, from 52.8 in April. As per the survey panellists growth of new work at services firms eased for the second month running in May. Where new business inflows expanded, aggressive marketing campaigns were reported. Nonetheless, there were mentions that growth was restricted by increased competition and the assembly elections in some regions. Manufacturing order books increased at a quicker pace that too was modest.

Although some firms took on additional staff, the overall pace of job creation was fractional. Services staffing levels increased in May, following a stagnation in the prior month. But with only 1% of survey participants signalling higher payroll numbers, the overall rate of job creation was fractional. A marginal increase in manufacturing employment was also registered.

Input costs rose again amid reports of higher petrol prices, average cost burdens facing service providers in India rose during May, leading to a further increase in prices charged. The latest increase in input prices was the eighth in as many months, but the rate of inflation eased since April and was lower than its long-run average.

Going forward, the Services companies expect output to increase over the coming 12 months; however the degree of optimism reportedly weakened to the lowest since February. As per the Markit’s survey exactly 15% of firms forecast activity growth, citing favourable government policies, improved marketing strategies, business expansion plans and hopes of better demand conditions.

The CNX Nifty traded in a range of 8,262.00 and 8,209.85. There were 21 stocks advancing against 30 stocks decliners on the index.

The top gainers on Nifty were Axis Bank up by 3.41%, Kotak Mahindra Bank up by 3.04%, Tata Power up by 2.70%, Hindustan Unilever up by 2% and NTPC up by 1.90%. On the flip side, Idea Cellular down by 11.22%, Bharti Airtel down by 2.53%, Lupin down by 1.83%, BHEL down by 1.67% and Hero MotoCorp down by 1.37% were the top losers.

European markets were trading in green terrain; France’s CAC increased 16.88 points or 0.38% to 4,482.88, Germany’s DAX gained 43.8 points or 0.43% to 10,251.80 and UK’s FTSE 100 was up by 58.09 points or 0.94% to 6,243.70.

Asian equity markets ended higher on Friday as investors shrugged off OPEC's decision against an output cut and looked ahead to the release of the closely-watched monthly US jobs report tonight that could provide more clues on the timing of US rate increases. The US jobs report is expected to show an increase of about 158,000 jobs in May, with the jobless rate seen edging down to 4.9 percent. While a firmer close on Wall Street overnight and steadier commodity prices offered support, but gains were capped by a stronger yen and data showing slowing business activity growth in China for the second month in a row. Chinese shares posted their best weekly gain since March as hopes for inclusion of A-shares into the world's biggest indexes helped investors shrug off disappointing services sector data. Activity in China's services sector continued to expand in May, albeit at a slower pace, the latest survey from Caixin revealed a services PMI score of 51.2, underscoring fading growth momentum in the world's second-largest economy. Japanese shares eked out modest gains in thin trade despite the yen rising for the fourth consecutive session against the dollar.